Chart of the Week
Congress.
Medicare Trustees Report. Senate Finance Ranking Member, Mike Crapo (ID) and House Way and Means Ranking Member, Kevin Brady disclosed that the Medicare Trustees Report, typically released in the spring, will be delayed indefinitely. The delay could be due to politics – although the Office of the Actuary tends to resist such temptation. It could also be that the Trustees are wrestling with how to project pent-up demand and increased acuity.
To date, as part of the rate-setting for Medicare Advantage, the actuaries have stayed away from changes to the character of demand and projected FFS spending will return to trend after 2022. Trend for 2021 and 2022 are projected as mostly a “makeup” of utilization declines in 2020 and part of 2021.
Additionally, the delay means the question of the trust fund’s solvency remains unclear. In September 2020, the Congressional Budget Office estimated the doomsday clock would stop ticking on 2024. They have since walked that back to 2026.
If anecdote becomes data and the cost of care increases as Medicare beneficiaries are sicker for longer, the 2024 date could turn out to be more right than wrong.
HCBS. The $400B the president wants for Home and Community-based Services is hitting a snag with Republicans who want the infrastructure bill, American Jobs Plan Act, be confined to traditional definitions.
The White House.
Budget. The White House released its FY 2022 budget this afternoon, before a long holiday week…the first “normal” holiday weekend in over a year. I guess they are hoping no one reads it. The budget, in effect, folds the American Jobs Plan and the American Families Plans into the budget proposal. To refresh your memory on what that includes here are some highlights:
- $9B in additional funds to NIH including nearly doubling the appropriation for the National Institute for Minority Health and Health Disparities from $392M to $652M
- Of the $9B going to NIH, $6.5B would be appropriate to the Advanced Research Projects Agency, a new unit within NIH. Modeled after the DoD’s Defense Advanced Research and Development Agency, ARPA-H is designed to drive significant innovations and speed application and implementation.
- Make permanent the American Rescue Plan expansion of tax credits for people making over 400% of the Federal Poverty Threshold
- $3B for the Assistant Secretary for Preparedness and Response including an increase of $200M to $905B for the Strategic National Stockpile and 50% increase for BARDA
Not in the budget proposal are any strong proposals to limit the growth of drug prices.
More Testing. The Health Resources and Services Administration announced the release of another $4.8B for COVID testing in the uninsured population. In our Black Book on the Persistency of Testing (Replay here), we identified several populations that would use this source of funding including the incarcerated in most states and the homeless population. Undocumented immigrants working in essential industries like agriculture and food processing would likely also fall into this bucket. Depending on the specific appropriations language, this $4.8B would need to be spent by Oct. 2022 or 2023.
Regulatory Agenda.
Medicare Rule-A-Rama. The second tranche of Medicare payment rules are pending at the White House’s Office of Management and Budget. These are:
- Physicians Fee Schedule for 2022 and “other revisions to Medicare Part B”
- CY 2022 Home Health annual payment update
- CY 2022 ESRD annual payment update
- CY 2022 Hospital Outpatient annual payment update
Other Stuff.
Personal Consumption Expenditures. After showing signs of life in March, Health Care hockey stick’d, to use Hedgeye’s favorite sports reference, with a few important exceptions.
- Unlike most health care services lines, nursing facility expenditures are nowhere near pre-COIVD levels and making slow and halting progress in that direction.
- Hospitals are at or above pre-COVID levels on an absolute basis. Given capacity constraints imposed by labor shortages and the regulatorily determined bed capacity, the increase in PCE suggests higher cost per patients due to higher levels of acuity – a phenomenon that could persist for some time.
- Physicians and especially dentists are not back to pre-COVID trends.
- Medical laboratories, one of the few areas of health care that increased capacity, mostly on the federal Treasury’s dime, are well above pre-COVID levels in absolute terms but down from peak expenditures in January. The decline in COVID testing has contributed to the 2% decline each month since January.
- Prescription drug expenditures are at pre-COVID levels, some of that spending no doubt due to COVID itself. MoM growth slowed a bit in April. That could be due to insufficient throughput at physicians’ offices or lingering concerns about seeking medical care.
- The 200 billion question that will persist through the summer and fall is if or how much premiums will need to increase to accommodate what appears to be an emerging picture of more and more expensive utilization.
Who Regulates LDTs. The American Clinical Laboratory Association (read: DGX and LH) asserts the Food and Drug Administration does not have authority to regulate LDTs. This argument is over a decade old but got a new tank of gas when then HHS Secretary Alex Azar essentially forbid oversight by the FDA except in the case of a voluntarily submitted EUA.
The ACLA’s position is in direct opposition to House Democrats calls for the FDA to regulate LDTs. With the explosion of CLIA certified labs the last year, it seems hard to imagine that the genie, already resisting, is going back into the bottle.
Health Care Gets Productive. HCA announced a strategic partnership with Google Cloud Services to develop algorithms to improve operating efficiency and patient care. The agreement suggests a number of important trends. First, HCA is not content to hire CERN or Epic to manage patient records and is, in effect, planning on developing their own system of sorts. Second, the partnership probably means that labor supply is not likely to snap back as easily or readily as the “reopening trade” seems to be suggesting. The need for each unit of labor to be as productive as possible becomes – err – more acute.
When the Cash Price is Usual and Customary This week the largest Blues plans filed suit against CVS claiming that the drug chain’s cash pay discount program’s price was, in fact, the usual and customary price and thus should be the basis for the insured price. In other words, the Blues claim that you cannot assert a made-up price is “usual and customary” when you are committing to transactions regularly at a lower cash price.
The lawsuit will take years to resolve but as drug discount programs proliferate for cash pay buyers, whether an in-house solution like CVS’s program or and external solution like GDRX, it becomes more and more difficult to assert the usual and customary price is just that.
The risk of litigation may push pharmacies to reject cash discount arrangements, something we understand through anecdote is already occurring especially at independent pharmacies.
AMN Contract with FEMA. Details of contract were released this week. Term is through Nov. 2021. You can monitor delivery orders here.
SPAC and S-1 Corner.
Interesting S-1s:
Doximity (DOCS). (MS - $100M). DOCS sort of proves the point that telehealth has become or is becoming a commodity. DOCS provides a doctor friendly platform for conducting telehealth visits to “to help every physician be more productive and provide better care for their patients.” Productivity in health care: a new and powerful theme with a long, long tail.
SPAC Corner
FORE announced their business combination with P3 Health Partners, yet another Medicare Advantage company.
You can access the updated SPAC spreadsheet here.
If you are investing in SPACs but not super familiar with health care, hit and we can help.
Recent Events.
Direct Contracting: Roll-up, Blow-up or “This Time is Different?” Replay here.
Tweet of the Week
Have a great holiday weekend.
Emily Evans
Managing Director – Health Policy
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